By Megan Durisin, Yuliya Fedorinova and Abdel Latif Wahba

The threat of Russia tightening wheat-export restrictions to safeguard its food supplies is spooking traders, prompting Egypt to take the rare step of canceling a tender to buy the grain.

Russia said it will this week discuss whether to adjust an export tax planned for next month amid concerns the measure hasn’t done enough to keep high domestic prices in check. Egypt, its top customer, drew offers from the fewest companies since June at high prices. That prompted the tender to be scrapped.

The dearth of participants highlights how protectionist measures in grain markets are adding to concerns about tighter global supply. Benchmark wheat, corn and soy futures are near six-year highs as adverse weather threatens crops, and major grain suppliers including Russia and Argentina are seeking to curb shipments to quell local food-price inflation.

“Traders will play on the defensive, given that the increase in the Russian export tax might change the price of the wheat they’ll have to transport and export out of Russia,” said Carlos Mera, senior analyst at Rabobank. “I would expect any increasing tax would result in lower exports going forward.”

Egypt buys most of its wheat from Russia, the world’s top exporter. It received only one offer of Russian grain on Tuesday, which was well above prices for Romanian and French supplies, according to traders who asked not to be identified. In the last tender in mid-December, 10 companies offered wheat. Egypt has canceled tenders just a handful of times in recent years.

Russia has a history of disrupting the wheat market by implementing restrictions or duties. Egypt’s tender was the first to seek supplies after Feb. 15, when the Black Sea nation plans to enact a grain-export quota and 25 euro ($30) a ton tax on wheat exports.

A custom and tariff sub-commission will meet this week to discuss whether to adjust the duty. The nation’s grain-export union said the measures have been nearly fully absorbed by international markets and the country “has no choice” but to consider raising the tax.

“It’s too early to say how high that will be,” Eduard Zernin, head of Russia’s grain-export union, said on Monday. Interfax reported a grain-market source as saying a tax of 50 euros a ton was being considered.

Protectionist measures

Argentina on Monday called off a temporary ban on corn shipments and instead will opt for a daily sales cap until the coming harvest in March to protect local supplies. However, farmers riled by the original suspension pushed ahead with a three-day trade strike.

Chicago wheat futures rose as much as 2.4%, while prices reached a seven-year high in Paris. Traders are also keeping an eye on the U.S. government’s closely watched monthly crop report due later Tuesday, which is expected to show a smaller forecast for world stockpiles.

“You’ve got weather stories, and when on top of that you’ve got politics, you’ve got a perfect storm,” said Benjamin Bodart, a grains analyst at Agritel, a unit of Argus Media. “We were expecting some kind of reduction in demand, but it hasn’t really materialized as of yet. The big importers are trying to secure more food.”

--With assistance from Andrey Biryukov.

© 2021 Bloomberg L.P.